4.7 When I set up $mynetworks in /etc/postfix/main.cf I used CIDR shorthand (e.g. 127/8). I now appear to be having a problem. I guess Postfix doesn't like shorthand CIDR entries?

Correct. Use 127.0.0.0/8 instead. See section 8.2 in the Red Hat Postfix HOWTO for additional information.